Reclaiming Bank Charges

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Have you been asked to pay excessive bank fees on your current account in the past six years? Do you think they are unfair? If so, this guide will tell you what you should be doing next.

But first, one vitally important point you need to know: in July 2007, the UK's major banks and the Office of Fair Trading (OFT), a financial watchdog, agreed to jointly have a test case heard in the High Court to determine the legality - or otherwise - of bank charges.

A date for this test case has not yet been set. It may take many months for it to be heard. If the court decides in favour of the banks, then millions of claimants will receive nothing. On the other hand, if the OFT, which is on the consumers' side, were to win, the compensation floodgates will open.

It is also possible that the case may go to the Court of Appeal and even the House of Lords, which means the time it takes for the issue to be decided once and for all could take even longer.

In the meantime, the City's leading regulator, the FSA, has given banks a waiver from dealing with bank charges reclaiming cases. This means they do not have to meet claims in the meantime.

For now, however, any claims that have been made are not receiving offers of compensation, save for those individuals where offers have already been made by the banks.

If you have been made an offer, the criteria on what to do next should be:

How long we have to wait for the test case
What you think the outcome is likely to be
Whether the offer you have received comes remotely close to what you believe you are owed.

Only you can make a decision on those issues.

As for those who have not yet filed a claim, the advice is still to do so. You will then be at the top of any queue in terms of receiving a payout if the court comes down in favour of consumers. Plus, you will be able to backdate the scale of any claim to six years from now, as opposed to the date when the case is decided.

This guide provides template letters that you can simply add your personal details to, print off and then send to your bank.

But first, we need to understand how the issue has arisen.

For many years now, banks have traditionally levied large penalties on customers who go over their agreed overdraft limits.

The banks have long claimed that all these charges reflect the "true" cost of monitoring the account of someone who is overdrawn. But leaked internal evidence, from disgruntled current and former bank employees, suggests the real cost is between £2 and £2.50.

In April 2007, the OFT announced an investigation both into whether they were fair and also if banks should charge customers for having current accounts.

In July of the same year, we had the announcement of the forthcoming test case, which leaves existing and future claims in limbo.

So what can you do? Read our step-by-step guide and find out.

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